Sam Bankman-Fried took greater than $10 billion from FTX prospects, prosecutor says at trial

By Luc Cohen and Jody Godoy

NEW YORK (Reuters) -Sam Bankman-Fried took greater than $10 billion from unsuspecting prospects of his now-bankrupt FTX cryptocurrency trade, a U.S. prosecutor stated on Wednesday in opening statements on the 31-year-old former billionaire’s fraud trial.

Prosecutors with the U.S. Legal professional’s workplace in Manhattan say Bankman-Fried used FTX buyer cash from the trade’s 2019 launch till its November 2022 chapter with a purpose to prop up his hedge fund, Alameda Analysis, purchase luxurious actual property, and donate to U.S. political campaigns and candidates.

Thane Rehn, a prosecutor, stated it seemed like Bankman-Fried was on high of the world a yr in the past after amassing energy and affect. The previous crypto tycoon claimed in tv commercials and in FTX’s phrases of service that prospects’ cryptocurrency would at all times belong to them, not the trade, Rehn stated.

However Bankman-Fried, Rehn stated, “was not who he seemed to be.”

“All of it was constructed on lies,” Rehn stated. “He was utilizing his firm, FTX, to commit fraud on a large scale, and the cash he was spending to construct his empire – it was cash he was stealing from FTX prospects.”

Bankman-Fried didn’t take the cash , and a rising buyer base helped him paper over the theft, Rehn stated. However all alongside, Rehn stated he had been directing prospects to deposit their cash to accounts managed by Alameda, and had used FTX’s pc code to let Alameda withdraw deposits.

When Alameda’s dangerous investments in cryptocurrency started to lose cash in Might and June of final yr, Bankman-Fried “doubled down” and took extra money from FTX than ever earlier than, Rehn stated. However he stated the scheme fell aside in November 2022, when a leaked Alameda monetary assertion set off panic by FTX prospects.

“In the long run, the opening that the defendant had created at FTX was too massive,” Rehn stated. “As soon as prospects began asking for his or her a refund, the entire thing got here crashing down.”

Bankman-Fried’s legal professionals are anticipated to provide their opening assertion afterward Wednesday. The previous FTX chief has pleaded not responsible and is more likely to argue that whereas he did not handle danger adequately, he didn’t steal cash.

His legal professionals are anticipated to attempt to shift the blame for FTX’s dramatic failure to the cooperating witnesses, and argue they’re implicating Bankman-Fried with a purpose to search lenient sentences.

JURORS TO HEAR FROM INNER CIRCLE

Prosecutors are anticipated to name three former members of Bankman-Fried’s inside circle – former Alameda chief government Caroline Ellison and former FTX executives Nishad Singh and Gary Wang – to testify in opposition to him. All three have pleaded responsible and agreed to cooperate with prosecutors.

“They provides you with an insider’s view of how the crimes occurred,” Rehn stated in his opening assertion, with out naming the witnesses.

Bankman-Fried’s trial kicked off on Tuesday, almost a yr after the collapse of FTX shocked monetary markets and tarnished the budding entrepreneur and philanthropist’s popularity as an trustworthy actor in a crypto sector liable to scams and purported get-rich-quick schemes.

Earlier on Tuesday, a jury of 12 main members and 6 alternates was chosen.

Bankman-Fried’s dad and mom, Stanford Regulation College professors Joseph Bankman and Barbara Fried, had been seen arriving on the federal courthouse in decrease Manhattan on Wednesday morning. That they had not attended the trial’s first day.

Their names had been each on a listing learn by a prosecutor on Tuesday of attainable witnesses or people who could also be in any other case talked about in testimony, together with Bankman-Fried’s brother Gabriel Bankman-Fried and former Donald Trump staffer Anthony Scaramucci. That doesn’t essentially imply they are going to be known as to testify.

As soon as recognized for his informal apparel and mop of unkempt curls, Bankman-Fried sported a trim haircut and wore a swimsuit and tie in courtroom on each Tuesday and Wednesday.

He has been detained on the Metropolitan Detention Middle in Brooklyn since Aug. 11, when Kaplan jailed him for seemingly tampering with witnesses, together with by sharing Ellison’s personal writings with a reporter. Bankman-Fried and Ellison had been at instances romantic companions.